News and Perspectives from Pacific Gas and Electric Company

PG&E on Friday outlined a comprehensive Pipeline Safety Enhancement Plan to modernize its natural gas transmission operations over the next several years in order to help achieve new, tougher standards for pipeline safety.

PG&E would replace about 185 miles of pipeline segments.

The plan, subject to regulatory approval, proposes a series of measures that represent a clear break from the way California and its utilities have approached pipeline safety in the past.

Earlier this year, in response to the September 2010 gas pipeline explosion in San Bruno, the California Public Utilities Commission (CPUC) launched a formal effort to establish new rules for pipeline safety in California. The plan filed with the CPUC is the result of PG&E working with utilities, regulators and other stakeholders to help define the new standards and present a strategy for achieving them.

The new standards would make California’s pipeline safety rules the strongest in the country, said Nick Stavropoulos, PG&E’s new executive vice president of gas operations.

“PG&E’s plan is really all about modernizing our gas transmission system and providing our customers with confidence that PG&E’s pipelines meet the highest standards when it comes to public safety,” said Stavropoulos. “The tragedy that occurred in San Bruno made it clear that the existing standards needed to change. We went out and brought in industry-leading experts from all over the country, people that have a great deal of experience in improving gas transmission networks. And we picked the best ideas and brought them together to craft a plan that raises the bar to the level it needs to be.”

Measures proposed

The proposed plan would run through 2014 and include the following work:

Strength testing about 780 miles of pipeline segments

Replacing about 185 miles of pipeline segments

Making about 200 miles of pipeline segments “piggable,” in which an inline inspection tool known as a pig is inserted into a pipeline to gather detailed information

Automating 228 valves

Validating maximum allowable operating pressure for all transmission pipeline in the system

Improving the asset management system for pipeline records

In addition to the measures proposed, PG&E also plans to develop a more comprehensive emergency response plan.

Also on Friday, Sempra Energy and Southwest Gas proposed their own enhanced safety plans with the CPUC to modernize their gas operations. The CPUC is expected to rule on the utilities’ plans in early 2012. PG&E’s plan mirrors some of the same pipeline operations rules that will be considered by the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration in their recently proposed rulemaking.

The plan applies modern standards to pipelines that are “grandfathered” under current regulations. As part of the plan, the utility would perform strength tests on all pipelines without strength test records.

Cost sharing

As part of the filing, the CPUC asked PG&E to address the question of funding for the $2.2 billion plan and cost sharing between shareholders and customers.

Under the proposal, PG&E shareholders would pay more than a half billion dollars over the 2011 through 2014 timeframe.

“The San Bruno accident has led to a tremendous amount of work and expense that we will not ask our customers to pay for, and our proposal reflects that,” said Tom Bottorff, senior vice president of regulatory relations.

The company’s filing stated that this work would translate into a total rate adjustment of $769 million for customers through 2014—no impact in 2011 and an increase of about $250 million in 2012, which will remain in place for a three-year period. For ratepayers, that’s an average monthly increase of $1.93 for a typical residential customer and $14.95 more per month for a typical small business.

“Our request for customer funding is carefully limited to those investments and costs that are needed to achieve the new standard for pipeline safety and deliver greater benefits to the public,” said Bottorff.

If approved, the plan to enhance pipeline safety would likely mean that PG&E would create new jobs for inspectors and pipeline workers.

PG&E will continue to immediately address any issue identified as a threat to public safety, and the utility’s gas control centers will continue monitoring its pipeline system seven days a week, 24 hours a day.

Stavropoulos, who has a track record of improving some of the nation’s oldest gas systems in New England and the Northeast in his 30-year career, said PG&E is well prepared to take on the work needed to restore the public’s faith in its operations.

“These plans that we’re going to be offering really are going to address the commission’s desire to make sure that we have the safest natural gas networks in the United States,” Stavropoulos said. “And if we’re successful in getting this plan approved and executing the work that we’re proposing, we’re certainly going to be heading in that direction.”

PG&E Perspectives

PG&E’s plan to enhance the safety of its natural gas pipelines was filed with the California Public Utilities Commission on Aug. 26.

It represents a clear break between the way California and its utilities approached pipeline safety in the past and the way it’s going to be approached in the future.

The result of this effort will be significantly higher standards for pipeline safety that better serve PG&E’s customers.

When these new standards are in place, California’s pipeline safety rules will be the strongest in the country.

Proposals for the multiyear program include strength testing, replacing pipeline, retrofitting pipes, expanding the use of remote control and automatic shutoff valves and implementing interim safety enhancement measures.